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Tax-free unit trust

As of to­mor­row, in­vestors will be able to in­vest in the Al­lan Gray Tax-Free Bal­anced Fund. The new fund al­lows in­vestors to take ad­van­tage of the tax-freein­vest­ment leg­is­la­tion that came into ef­fect in March 2015, which was in­tro­duced by Trea­sury to en­cour­age South Africans to save.

The Al­lan Gray Tax-Free Bal­anced Fund will have the same man­date and ob­jec­tives as Al­lan Gray’s Bal­anced Fund and will be man­aged in a broadly sim­i­lar way, but will charge a fixed fee in­stead of a per­for­mance-based fee, to com­ply with leg­is­la­tion gov­ern­ing tax-free sav­ings and in­vest­ment prod­ucts.

Al­lan Gray says the to­tal ex­pense ra­tio of the fund will be about 1.57%, in­clud­ing all in­vest­ment man­age­ment fees, trad­ing costs, ad­min­is­tra­tion fees and VAT. This, how­ever, does not in­clude fi­nan­cial ad­viser fees – if they are ap­pli­ca­ble.

Richard Carter, head of prod­uct de­vel­op­ment at Al­lan Gray, says: “Our re­search in­di­cates that us­ing a tax-free in­vest­ment ac­count will gen­er­ate mean­ing­ful value com­pared with a ba­sic unit trust in­vest­ment over the very long term. The po­ten­tial af­ter 15 years could be as much as an ex­tra 30%, driven by the value of com­pound­ing all gains tax-free.”

Net wealth de­creases

The value of South Africans’ net house­hold wealth de­creased at an an­nu­alised pace of 4.5% dur­ing the third quar­ter of last year.

The Mo­men­tum Unisa Wealth Re­port for the pe­riod re­flects that the con­se­quence of this de­cline is that house­holds – which al­ready had to lower their life­style – will have to con­tinue with this process.

More­over, they will have to lower their fu­ture life­style ex­pec­ta­tions and re­view their sav­ing and re­tire­ment tar­gets, as well as ad­just their other sav­ing and in­vest­ment goals.

The rea­son for the de­cline in the value of house­hold net wealth can be at­trib­uted to a strong de­crease in the value of house­hold as­sets, while li­a­bil­i­ties in­creased mod­er­ately.

Ac­cord­ing to the sur­vey, about 74% of house­hold debt can be at­trib­uted to mort­gages and ve­hi­cle fi­nance, but only 33% of th­ese in­stal­ments is used to re­pay se­cured debt.

Con­versely, al­though un­se­cured debt (credit and store cards, and per­sonal and mi­croloans) com­prises only 26% of all debt, about 66% of all in­stal­ments go to­wards re­pay­ing the un­se­cured debt.

Rogue ad­viser to pay up

Fi­nan­cial Ad­vi­sory and In­ter­me­di­ary Ser­vices Ombud Nol­untu Bam re­cently or­dered that In­vesti­plan and Her­mann Waschefort were li­able for the pay­ment of R500 000 to dis­grun­tled in­vestor El­iz­a­beth van Schalk­wyk.

Van Schalk­wyk sold her house for a profit of R500 000 in Fe­bru­ary 2011. She asked Waschefort to in­vest the money on her be­half and stated that she needed to draw down R4 000 a month and wanted the rest of the in­ter­est to be fun­nelled back into her in­vest­ment.

She was told the money was in­vested in the In­vesti­plan Pri­vate Equity Fund. How­ever, the promised re­turn of 9.6% a year did not ma­te­ri­alise and Van Schalk­wyk lost her money.

In her rul­ing, Bam found Waschefort and In­vesti­plan failed to ex­plain what hap­pened to the com­pany and the client’s funds. Bam also or­dered Waschefort and In­vesti­plan to pay in­ter­est of 9% a year from May 28 2012 to the date of pay­ment.

When you use a fi­nan­cial ad­viser, you need to check that he or she is qual­i­fied to ad­vise you. The ad­viser should also reg­u­larly pro­vide you with writ­ten records of your in­vest­ments.

Emo­tions and fi­nance

Hu­man be­hav­iour spe­cial­ist Mavis Ureke will be launch­ing her book, Man­ag­ing Emo­tions for Fi­nan­cial Free­dom: The In­vis­i­ble Forces Driv­ing your Money Habits, on Satur­day at the Protea Ho­tel Wan­der­ers, Jo­han­nes­burg.

This is a free event with guest speak­ers join­ing Ureke to talk about fi­nances and emo­tions.

To book a place at the event, email ad­, or call 011 326 2499.

To or­der the book, go to mav­i­

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